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You or your parents may think a will is enough — until probate creates costly delays and stress. One simple document could help your family avoid a financial nightmare.
I recently helped a friend go through probate after her father passed away. Although he had a will, he did not have a Revocable Living trust — the document that can help families avoid lengthy and costly probate.
What many people do not realize is that a will alone does not avoid probate. Probate is the legal process of settling someone’s estate after they die, and it can take many months — sometimes more than a year — to complete. During that time, families often cannot fully access the deceased person’s money or property.
In my friend’s case, her father left her his house. But because the property still had to go through probate, she could not immediately access his bank accounts or other assets. For over a year, she had to use her own money to pay the mortgage, insurance, taxes, and maintenance on the home just to keep the property from falling into foreclosure.
All of this could likely have been avoided if her father had created a Revocable Living Trust and transferred the deed of the house into the trust while he was alive. Instead of waiting more than a year, she could have had access to the property and assets within weeks.
Probate can also be expensive.
In states like Florida and California, attorney fees for probate are often based on the gross value of the estate — not the equity.
For example, in Florida, statutory “presumed reasonable” attorney fees are generally around 3% for estates between $100,000 and $1 million.
That means if your mother owns a house worth $500,000 with a $400,000 mortgage, the probate estate may still be valued at $500,000. Even though there is only $100,000 of equity, the probate attorney fee could still be about $15,000.
California can be even more expensive because both the attorney and the executor are entitled to statutory fees based on the gross estate value. In a similar example, the combined fees could easily total $20,000 or more.
A revocable living trust can help families avoid much of this expense, delay, and stress.
A revocable living trust is flexible and can be changed at any time while you are alive. I often explain it this way: the trust is like a suitcase, and your assets — especially your home and financial accounts — are placed inside that suitcase. Your will then explains how those assets should ultimately be distributed.
Many people assume estate planning documents are extremely expensive, but that is often not true. An attorney can usually prepare a revocable living trust, will, durable power of attorney, health care documents, and advance directives for approximately $2,500–$4,000 — often far less than the eventual cost of probate.
A much simpler and less expensive tool is Suze Orman’s Must Have Documents, which allows families to create and update important estate planning documents online. You can create this in under an hour and the lifetime price is $99. I highly recommend this if you don’t want to pay for an estate attorney. This is a great website that explains all of the documents even if you decide to use an estate attorney
If you or your parents do not yet have a revocable living trust in place, it is worth taking the time to set one up now. It can save your family significant money, delays, and unnecessary stress later.
Losing a loved one is already such a sad and difficult time. I personally know how overwhelming and emotional it can feel. My goal is to help women avoid the costly and stressful mistakes I so often see families go through after someone passes away — and to make this process a little easier for the people you love.
Lucretia, this is a really great post. I’ve written about this, too — from a “don’t do this” perspective. My experience is recorded here.
Jeff, Thanks for sharing. Your experience is definitely a cautionary tale. My parents didn’t have a trust set up. I was able to sell my mother’s house while she was alive before she became incapacitated. She needed the money from her house to pay for the assisted living which was over $10,000 a month the year she passed.
A number of people have asked how to find a good estate attorney. If you live in NY or Conn I would recommend my estate attorney Anne Crane acrane@mclaughlinstern.com 203-313-4190. You really need an estate attorney that is for your state.
In one of Suze Orman’s PBS specials about estate planning documents, she made a comment that I found very intriguing at the time, something to the effect of “planning for death is easy, its incapacity situations that can be hard.”
It is important to make sure that future incapacity situations are properly prepared for and understood by relevant family stakeholders, whether the guiding document is a revocable living trust or power of attorney.
Excellent discussion Lucretia, and thanks as this will help many people. When my parents passed, I personally did all the sorting out of the Trust, we did not even need an attorney. Our bank helped us start a Checking account and all payments were made with the Trust’s money. We even did the taxes. The Trust is very clear and it bypasses Probate. The total cost was only about $2000, the estate was about $300,000. Every family will appreciate having a Living Trust, so very helpful during a stressful time.
The real problem here is that state probate mechanisms are outdated, Byzantine, intimidating and costly. The governing laws often require that the equivalent of a lawsuit be filed, that specialized counsel be retained, and that many upfront costs be incurred. The process itself usually takes ungodly amounts of time to play out. Probate should be simple, with easy-to-understand procedures, and paperwork that doesn’t require an advanced degree to complete. One shouldn’t have to create, fund and maintain an entirely new entity – a trust – to move one’s assets to loved ones and other beneficiaries. And the process should be able to play out over months, not years.
Thank you for this article, Lucretia. It prompted me to pull out our “Must Have Documents” and review them. I found that they were created 15 years ago-when we were living in a different state. I assume that all four of the documents (will, financial power of attorney, advance directive and revocable trust) have to be redone when you move to another state? We moved from CO to ID.
By the way, we did these all from Suze Orman’s website. She made this overwhelming task seem doable for the average person.
For sure Mary, have an attorney review your Trust, when you change states, certain documents must be updated. I moved from IL to TX, updated documents, then I move TX to MO, again updated documents, and not overly costly, like $1500 or so depending where you live.
I agree. Each state have very different estate laws.
I live in PA and I’ve read that there is not much advantage to have a Living Revocable Trust if one already has a current will and durable power of attorney.Can you please comment on this? Thanks……………….Fred
I strongly suggest you discuss with a friendly attorney who can explain the differences, and there is more than just those documents. At least talk to your associates who have Trusts, there are many advantages, especially over Probate.
I have both a living revocable trust and a will and a durable power of attorney plus a health proxy. Here is a good article that shows what each does and the differences. https://www.ironclad.law/power-of-attorney-revocable-trust
great article. In the comments, DrLefy noted he’d found a local fiduciary in Calif. Does anyone know of something like this that is reputable in the Sarasota area? How does one find someone honest, it’s such a position of responsibility.
I have been talking to Vanguard and Fidelity about being a trustee. They offer these services. I also heard Charles Swarb offers trustee services but I haven’t spoken to them. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/applications/solSum_trust.pdf
I was an executor of all four of my grandparents estates and helped my mom with my dad’s estate and my wife with her dad’s estate. All in NYS. In all but one case, due to a difficult family member, probate took less than nine months and we paid attorneys by the hour. We saved some money by my dealing with the financial institutions that didn’t need to be prodded by a dunning letter on attorney’s stationary. What made this possible was all the papers were in order and no one contested anything.
Another simple solution, available in 33 states plus DC, is a transfer on death deed (TOD). This document allows you to transfer your house or condo directly to your heirs when you pass. Like designating beneficiaries for IRAs, brokerage accounts, and bank accounts, setting up a TOD document avoids probate and is less complicated and expensive than setting up a trust.
The issue with transfer on death is there is no incapacity clause. So for the example I used in my article if the mother becomes incapacitated like dementia and the daughter needs to sell the house to pay for assisted living she cannot with a transfer on death. She has to go to court. A power of attorney document may work or may not depending how it’s written. So that is the risk on not having a revocable living trust and just a transfer on death. So people just need to make an educated decision on what works for them and understand the risks. Thanks for your comment
My mother and aunt had to go through this with my grandmother. She was 85, had a fall, didn’t recover well, and had to go into residential care. No durable POA, no incapacity clause, and the only resource available to pay for her care was her paid-off condo to which she would never return. They had to go to court to get guardianship so they could sell the condo and free up assets for her care.
Yes this is exactly the risk with just having transfer on death on the deed. If her condo was in a revocable living trust with an incapacity clause they wouldn’t have had to go to court. Thank you for sharing.
“In my friend’s case, her father left her his house. But because the property still had to go through probate, she could not immediately access his bank accounts or other assets. For over a year, she had to use her own money to pay the mortgage, insurance, taxes, and maintenance on the home just to keep the property from falling into foreclosure.”
This is wrong. While the estate is in probate, you can use estate assets to pay estate expenses. What kind of estate lawyer did she have? You file for probate, you get appointed executor, your lawyer gets a tax ID for the estate, and you go to the bank, show them the executor certificate, and the bank converts the decedent’s account to an estate account identified by the estates tax ID. The executor can then write checks to pay estate expenses, which offset estate income on the 1041.
You are correct. Just to clarify. Her father didn’t have enough bank assets to continue to pay all of the costs to maintain the house. The majority of his assets were tied up in the equity of the house which she couldn’t sell until probate was finished. That is why she had to use her own assets until she could sell the house. Thank you for pointing this out.
Estate planning attorney here. A well-written, well-funded, well-administered living trust can be very useful. However, many people who have them do not fund them well and frankly don’t understand what it is all about. There are various ways to avoid probate if that is desirable. Also, choosing the wrong person to be trustee of your “living trust” can have catastrophic consequences as there is no supervision as there is with a court. Trusts may not be the right beneficiary for retirement plans. Creditor claims can be another issue with “living trusts”. Approach with caution.
We had a trust set up for seven years that had nothing in it because our first attorney just took our money and said good luck. We hired a new estate attorney, started over, and she gave us a detailed checklist about what we needed to do to fund/move assets into the trust—plus a follow-up visit four weeks later so we could show her that we did it.
We also signed up with a local fiduciary to be our trustee because there are a couple of complicated family dynamics reflected in our estate plan, and we didn’t want to rely on a friend or family member to deal with those.
Our estate attorney is great and we’re glad we did it.
This is a very good point. If you don’t “fund” your trust it’s not useful. The way I funded my revocable trust is changing the deed in my house to the name of the trust. I also changed the beneficiary’s to the name of the trust. But this is very individual on what is the best way. You need very specific instructions from your estate attorney. That is why I stress a good estate attorney is crucial
DrLefty, may I ask what the local fiduciary specialty is that you found, and what percentage do they charge?
This is the website: https://deantrustee.com/
They charge hourly based on work done, not by percentage.
Thanks for the info!
My understanding from my reading The Retirement Savings Time Bomb Tock Louder by Ed Slott (considered the preeminent expert on IRAs) is that trust should generally not be the beneficiary unless there are very specific circumstances such as minor children, or it is a see through trust. After reading the book I contacted our estate attorney and he confirmed our estate is designed appropriately.
Generally individuals are the better choice for retirement plans and IRAs.
I agree a good estate attorney who comes highly recommended is worth it. But I’d also recommend educating yourself especially around the tax implications. The first time I used an attorney recommended to me by my cpa the attorney didn’t set up a revocable living trust. I now have an excellent estate attorney who setup my estate and educated me and it is totally a different experience. My estate is so much better protected. The cost was totally worth it.
I live in Alabama, I have consulted two attorneys in regards to the need of a “revocable living trust”. I have been told in my situation it is not needed. All states and family dynamics are different.
One could consider a transfer on death deed if allowed in your state. This should keep the home out of probate
The issue that you need to worry about with transfer on death is what happens if you become incapacitated like my mother (dementia) was and you need to sell her house to pay for assisted living. A power of attorney may help if written correctly or maybe not. If I owned real estate I would setup a revocable trust with an incapacity clause. I just want people to make an educated decision and I would ask your attorney what happens if you become incapacitated as I highlighted in my article
A good idea. I did this for my mother’s real estate and automobiles. One of the key requirements (in Colorado and Virginia) is that the real property be owned free-and-clear.
(I’m not a lawyer)
The trust idea is sound. Setting it up for $99 online is risky. A competent attorney is worth the money every time except maybe in the simplest situations.
i agree that my first choice is to use a good estate attorney and not a lawyer who does this on the side. Each state has different rules. However for people who don’t have these documents I would recommend these documents. Many people don’t have these 4 documents. My estate lawyer added a lot of value in helping me think through many issues.
Agree. Any money saved using online resources typically have issues that an attorney has to correct or the beneficiaries will have to suffer through.
Thank you, Lucretia, for this good advice. Though I don’t have a revocable living trust like you suggest, I will consider it. When my husband died suddenly during Covid, leaving me with sole custody of a grandchild, I had concerns about what would happen in the event of my own sudden death. Custody of the now-adult grandchild would have gone to one of my two adult children. I trust both of them completely, and they trust each other. I immediately made one of them co-owner of a new checking account and the other, co-owner of a second checking account. Similarly, I made one the sole beneficiary of a paid-up life insurance policy that has adequate funds to cover the costs of maintaining my home until my estate can be settled. By passing these assets, plus my IRAs, of which all three of my children are equal beneficiaries, the majority of my assets should pass to them immediately and outside of my will, as I understand it.
the way you set up your beneficiaries is critical. As you correctly stated the beneficiary over rides what you have in the will. One man had $2 million in an account with a girlfriend that he hadn’t seen in 30 years as a beneficiary and after he died she got the $2 million even though the 2 million was supposed to go to his brother as the will stated.